Gold edges higher as China surprises with dismal data

Gold has started the week with slight gains in the Monday session. In North American trade, the spot price for one ounce of gold is $1290.67, up 0.22% on the day. There are no U.S. indicators on the schedule. On Tuesday, the U.S. releases PPI reports and the Empire State Manufacturing Index.

Gold is sensitive to moves in interest rates, and the Fed’s surprisingly dovish stance could boost gold prices. Fed Chair Powell is now preaching prudence and patience, and the minutes from the Fed’s December meeting, released Wednesday, noted that low inflation levels meant that the Fed could “afford to be patient about further policy firming”. Even more striking, the minutes revealed that at the December meeting, some policymakers opposed a rate hike, arguing that inflation was too low to warrant higher rates. On Thursday, Fed Chair Jerome Powell said he was “very worried” about the massive U.S. debt and reiterated that the Fed would remain patient on monetary policy. Given that further interest rate hikes would hurt the debt burden of corporate borrowers, Powell’s remarks on the debt could be a sign that the Fed will take a pause on rate hikes in the near future, and perhaps even entertain a rate cut this year. The sharp U-turn on monetary policy by the Fed could continue to weigh on the U.S dollar for the near future, and that could spell gains for gold.

XAU/USD posted small gains in the Asian session and stronger gains in European trade. The pair has reversed directions and given up most of these gains in North American trade

1284 is providing support

1306 is the next resistance line

Current range: 1284 to 1306

Further levels in both directions:

Below: 1284, 1261, 1236 and 1220

Above: 1306, 1326 and 1355

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